In the wake of a “sharp deterioration” in the global economic environment and its impact on India, a scale-down in the country’s growth projection is now official, almost. Planning Commission Deputy Chairman Montek Singh Ahluwalia, on Friday, conceded that achieving a GDP (gross domestic product) expansion of 8 per cent in the next five years through the XII Plan would require a “major effort” and would not come about as a “God given right”.
Interacting with journalists on the sidelines of a first-time conference with state planning boards here, Mr. Ahluwalia pointed out that achieving an average GDP expansion of 9 per cent during 2012-17 as enunciated in the XII Plan Approach Paper was out of question and a scale-down of the ambitious growth target for the five-year period would be internally discussed in the Planning Commission.
“It is not possible to think of an average of 9 per cent. I think somewhere between 8 per cent and 8.5 per cent is feasible...When I say feasible, that will require [a] major effort. If you don’t do that, there is not [a] God given right to grow at 8 per cent,” he said.
Last year, while vetting the Approach Paper for finalising targets for the Plan period, the Planning Commission had obtained approval for pegging the annual average economic growth target at 9 per cent from the National Development Council (NDC), the country’s highest decision-making body headed by the Prime Minister and with all Chief Ministers and Cabinet Ministers on board.
Mr. Ahluwalia noted that following the changes in the economic scenario, both globally and at home, once the new growth numbers are discussed internally, they would be placed before the NDC for inclusion in the Plan document.
The NDC, presided over by Prime Minister Manmohan Singh, is expected to meet in September.
Barring the changes in growth numbers, work on the Plan document is on track. “We have targeted the NDC meeting in September. I think we are on track,” Mr. Ahluwalia said while pointing out that in the run-up to the NDC meeting, a meeting of the full Planning Commission chaired by Dr. Singh was likely to be convened next month.
As for the expected GDP growth during the current fiscal year, Mr. Ahluwalia said: “Given that the world economy deteriorated very sharply over the last year, the growth rate in the first of year of the Plan (2012-13) is likely to be 6.5-7 per cent.”
At the day-long conference, Principal Advisor Pronab Sen made a presentation before the state planning board chiefs to explain why it would be “difficult to grow faster than 8 per cent, without being more efficient in our use of resources”. For one, the XII Plan has begun at a time when the economic conditions are not favourable and, therefore, a new strategy would have to be put in place to achieve higher growth. Such a strategy would involve optimal utilisation of natural resources and improvement in credit flow to small units, agriculture and the infrastructure sector.
However, if the Plan target is to achieve a growth rate of 9 per cent, the country would need to expand exports by 20 per cent each year for the five-year period and increase its engagement with the world to lure more foreign investments, Dr. Sen said.
Another scenario would be to opt for a GDP expansion of 8.5 per cent wherein the country’s economy would have to maintain a farm growth rate of 4 per cent along with manufacturing growth at the rate of 10.5 per cent.
This apart, it would have to generate 25 million new work opportunities in the non-farm sector and raise the green cover by one million hectare each year.
Alongside, the number of people below the poverty line would also have to be reduced by 10 per cent during the five-year period, or by an average 2 per cent each year, if a GDP growth of 8.5 per cent is to be achieved, he said.
